All CPAs are in the accounting profession. However, not all accountants are CPAs (certified public accountants). An accountant has achieved a bachelor’s degree in accounting. A CPA earns this designation after passing a CPA exam. After all, they must complete specific educational and work requirements, too. These requirements are specific to each state. This means a CPA will likely be more knowledgeable in accounting. A CPA can also perform duties that regular accountants are not permitted to do. This article will explore the differences between a CPA and an accountant. Let’s examine it.
What Is an Accountant?
An accountant is responsible for analyzing and reviewing financial records. They track the cash flow and financial transactions of a business. They also assist in some tax preparation duties. Sometimes, an accountant will also be involved in cost analysis. After all, they involve auditing, company financial planning, etc.
The Purpose of Accounting
The accountant has more subjective responsibilities than a bookkeeper. But, a bookkeeper maintains an accurate account of your financial transactions. After all, an accountant is there to handle more intricate tasks. It involves:
- Review company operational costs
- Analyzing business financial statements
- Helping you understand how your financial decisions will affect your business
- Preparing and organizing adjusting entries or expenses that your bookkeeper has not yet reported
You can make better financial choices to help catapult your company to success. It will happen when you are ready to examine the big picture of your business’s economic situation. After all, your accountant will be there to forecast and help you maintain a path of progress.
What does an accountant do?
Unless your accountant doubles as your bookkeeper, they can only start analyzing your transactions and data once your bookkeeper organizes this information. Once your accountant has access to these details, they may begin by:
- Adjusting entries
- Verifying provided data
- Performing audits
- Preparing balance sheets and income statements
- Generating financial reports
- Analyzing financial data
Who Called a CPA?
CPA is short for “certified public accountant”. A CPA is an accountant who has passed a specific exam the state Board of Accountancy provides. A licensed CPA is involved in analyzing financial data, recording monetary transactions, etc. It also involves record-keeping, auditing, tax planning, management consulting, etc. They focus on keeping a business’ finances healthy.
A CPA must also complete continuing education regularly as defined by the state in which they are certified, which includes a mandatory ethics component.
Difference Between CPA and Accountant
While both are accountants, when you look into the duties and tasks of someone working as a CPA vs accountant jobs, there are significant differences, which we will explore below.
Training And Licensing
Both accountants and CPAs must complete a minimum of a bachelor's degree in a related field. It also needs accounting program courses as specified by state authorities. A person can become an accountant by obtaining the appropriate level of schooling. It also needs working as an intern or starting a job as a lower-level accountant. These can be done with oversight from more knowledgeable senior employees.
A person must pass the state's Board of Accountancy CPA exam to receive a CPA license. After all, the person should complete 150 hours of college coursework and have at least two years of public accounting experience working under a CPA. The exam consists of four parts. Each of these is written separately. In most states, all four exams must be passed within 18 months. These involve:
- Auditing & Attestation
- Financial Accounting & Reporting (this is generally considered to be the most challenging part of the exam)
- Regulation
- Business Environment & Concepts
Additionally, a 5th part around Ethics must be completed (candidates are expected to pass the ethics exam within two years of applying for their CPA license with a score of 90 or above. This exam is a take-home, open-book test of 40 multiple-choice questions).
Applicants must score at least 75% in each CPA exam section. The CPA certification exam is generally considered difficult; less than 20% of test-takers pass all four sections the first time they take them.
Job Opportunities
You will likely work for one employer at a public or private corporation. It will happen if you’re a general accountant. After all, you may work as follows:
- Accounting manager
- Financial or budget analyst
- Internal auditor
- Project accountant
- Risk analyst
- Management accountant
- Tax accountant
- Self-employed accountant
A CPA, on the other hand, might find work in the following fields:
- Financial forensics accountant
- IT consultant
- Personal financial advisors
- Business valuator
Tax Preparation and Audits
Accountants can all file and prepare tax returns, including non-certified accountants and CPAs. However, it's important to remember that if compensated for this work, they must apply for and receive a Preparer Tax Identification Number (PTIN).
Along with the usual tax proceedings, CPAs can legally represent their client when interacting with the Internal Revenue Service (IRS). It is beneficial in cases in which complicated tax issues arise, as the business owner can be confident they're proceeding legally, per all state and federal tax laws.
Code of Ethics
General accountants don't have any overseeing governing body and, therefore, don't have a code of ethics they're legally bound to follow. It is not the case for CPAs, who must follow strict ethical principles. There are five codes of ethics a CPA must adhere to, as mandated by the American Institute of Certified Public Accountants (AICPA). These are:
- Integrity: They must only do what is right, according to the standard
- The public interest: They must ensure all actions serve the public interest
- Responsibilities: They have a responsibility to provide the best services possible
- Objectivity and independence: They must not be involved in conflicts of interest and must remain objective in all matters
- Due care: They must perform their job to the best of their ability, including upgrading their education and seeking the guidance and evaluation of others
Responsibilities
Accountants analyze and interpret the financial data of a company and prepare financial reports. Their duties vary by client and by industry, and they may perform a wide range of finance-related tasks for their employer or clients.
Some typical responsibilities of an accountant include:
- Ensuring a small business’s financial documents are accurate and comply with relevant laws, regulations, and tax codes
- Recording and classifying financial transactions (if a bookkeeper doesn't perform this work)
- Preparing financial statements and related schedules and disclosures
- Recommending internal controls and financial best practices
- Offering guidance to help small business owners overcome problems and reach their goals
- Overseeing business tax preparations and assisting external auditors with their annual company audits
- Improving the company’s accounting system
A CPA is responsible for more advanced accounting and business concepts, like the analysis and reporting of financial data. Their duties can be broken down as follows:
- Establishing, updating, or maintaining a company’s accounting policies and procedures, including bookkeeping methods, monitoring, and reporting
- Overseeing or participating in the creation of budgets
- Overseeing internal audits (to ensure the accuracy of reporting)
- Performing audit testing, preparing and creating audit reports for government audits or tax purposes
- Reviewing and providing consultation on compensation, benefits, assets, and spending of company money
- Managing accounts payable and accounts receivable
- Staying current on changes in the finance industry, tax laws, etc. Ensuring the company updates policies or procedures to conform with best practices
Although the above lists several duties of a CPA, it is essential to note that CPAs should not offer services where they audit and consult for the same business. The AICPA and the SEC consider this to be a conflict of interest.
The CPA, or Certified Public Accountant, is not an international designation; it is issued solely in the United States. For instance, a "CPA" designation exists in Canada but stands for "Chartered Professional Accountant".
Average Salary
Due to their higher skill level, in most cases, CPAs earn more than general accounting professionals. Accountants may earn around $61,480 annually, while senior CPAs earn an average of $92,795 annually. For partners in a CPA firm, the average CPA salary is $166,572. This figure does not include bonuses or other benefits. These figures vary based on their skill and experience level, their education, the industry they're working within, and their job location.
Accountant vs CPA: Which Is Better?
Both accountants and CPAs are essential, each with their own skill sets. CPAs are better qualified to perform some duties and are recognized by the government as credible and expert. Individuals with a CPA designation are trained in generally accepted accounting principles and best practices (including online tools).
What Percentage of Accountants Are CPAs?
According to the U.S. Bureau of Labor Statistics, there are roughly 1.3 million accountants in the U.S. The National Association of State Boards of Accountancy reports approximately 669,000 actively licensed CPAs, meaning approximately 50% of accountants in the United States are CPAs.
End Note
Deciding between a CPA and an accountant depends on the type of company you have. For example, a public corporation, a large international company, or a business with complex tax needs will benefit from hiring somebody with training in these areas. If your business is smaller, local, or private, an accountant will be able to handle your needs. If you’re unsure, just ask a tax professional near you.
Whether you opt for a CPA or an accountant, Fino Partners makes financial management more accessible than ever. With features like expense tracking, invoicing, and financial reporting, this powerful accounting software will support either type of professional in delivering accurate and efficient service, helping you make the most informed choice for your business needs. Connect with Fino Partners and see how it can simplify your business finances fast.
